Market Update 13/09/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX. If you have any questions or would like anything further explained, please don’t hesitate to reach out to your account manager or email info@cafx.com

Equities moved higher as the latest economic data didn’t significantly impact expectations for Fed rate cuts. Most major sectors in the US market saw gains, with both large and small caps outperforming the broader index. The S&P 500 rose by 0.8, while the Nasdaq 100 gained 1.0%. The “Magnificent Seven” mega-cap stocks advanced 1.5%. In Europe, the Euro Stoxx 50 increased by 1.1%, and the FTSE 100 closed 0.6% higher. The yield on the US 10-year Treasury inched up to 3.67%.

US core PPI rose by 0.3% last month, slightly above the expected 0.2%, while the annual core figure matched forecasts at 2.4%. This mirrored the CPI data earlier in the week, with a small uptick in the monthly core reading. However, any market reaction to the PPI data was muted due to downward revisions from the previous month.

US futures shifted to slightly higher odds of a 50bps Fed rate cut next week, following a Wall Street Journal report by Nick Timiraos, known as “The Fed Whisperer,” which suggested that policymakers are debating between a 25bps or 50bps reduction. The mere mention of a 50bps cut has left markets rethinking what seemed to be a more certain 25bps cut. There’s now a good chance the Fed might opt for 50bps, making it feel more like a coin toss. 

The USD has gradually weakened following the release of US PPI data, with the US dollar index (DXY) set to end its 4-day winning streak.

NZDUSD moved higher, supported by a weaker USD, rising from 0.6130 to above 0.6175. After nearing key moving averages, the pair found more breathing room. A drop below 0.6100 would have been seen as significant, with the 50, 100 and 200-day moving averages clustered between 0.6080 and 0.6100, offering strong support if the NZD declines further. If NZDUSD breaks above 0.6186, it could retest 0.6220 and potentially target August highs near 0.6300. For now, the pair remains in the middle of a 3-week range, awaiting direction from next week’s Fed meeting.

NZDAUD is holding steady at 0.9200 after briefly dipping to 0.9180, with the AUD benefiting from stronger equities and commodities, which supported risk currencies. AUDUSD has shown a bullish move upward and now appears set to establish a higher trading range as it climbs above 0.6700.

NZDEUR has remained steady and is testing the upper end of a four-day trading range, briefly rising above 0.5580. If the pair can break above 0.5600, it could retest the 100 and 200-day moving averages, paving the way for a move beyond the late August high just above 0.5660. The ECB lowered interest rates by 25 bps to 3.5%, as expected marking the second rate cut since June. Along with the decision, the bank made small downward adjustments to its growth forecasts and slightly raised its outlook for core inflation. President Lagarde emphasized that the ECB won’t commit to a specific plan for future rate cuts, stating the bank will continue to rely on data and that further rate reductions are not guaranteed.

The NZ manufacturing PMI will be released today at 10:30 am. Later tonight, we’ll see the University of Michigan’s consumer sentiment data, and on Saturday, China will release its monthly reports on retail sales, industrial production, and fixed asset investment.
 
Here are the latest mid-market rates: